Dulles, Va. - One year after shifting its business to an advertising-based model, AOL continues to lose subscribers, but gain ad revenue.

Parent Time Warner on Wednesday said that AOL lost another 1.1 million dial-up subscribers during the second quarter, finishing June with 10.9 million subscribers, down 6.8 million from a year ago and nearly 16 million from its high in 2002.

The defections resulted in a 38% drop in revenue to $1.3 billion.

Ad revenue, however, rose another 16%, primarily due to growth in display and paid-search advertising.

AOL's operating income increased 9% to $360 million.

It was one year ago Thursday when AOL said that it would stop actively marketing its core Internet access business -- which at the time brought in 80% of its revenue -- and instead focus on increasing ad revenue by providing its content and e-mail services for free.

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